*** Eric's Memo to an iHUBBER
I must be careful to prevent misunderstanding. If a CEO makes a prediction about factors over which he has only partial control, it must be understood to be subject to changes in circumstances.
In broad strokes I can say that the current share price is discounted because the market makers are betting that we are only somewhat likely to succeed. They have this view because most young public companies do not succeed. They feel that the odds favour that the company will eventually fizzle out. This is why there is a reluctance by them to hold shares for longer term appreciation or to let a price increase stay in place without profit taking. On the other hand, this creates opportunity for independently minded retail speculative investors who are more likely to go on a hunch as to whether a company has the “right stuff” to pull through where so many fail.
In our case, the right stuff is becoming increasingly apparent. We have a real product(s). It is being manufactured. These products are demonstrably effective. This includes not only testimonials by retail consumers, but also from prestigious commercial customers (Holland America Line, BioNest and others).The products are consumable (ie get used up and replaced). The products are now listed with the Canadian divisions of major U.S. retailers. Your company has retained these listings for more than the 6 month honeymoon period, thus indicating that the retailers perceive growth potential for the products. TV and radio advertising has commenced in certain local markets. Discussions have commenced with certain U.S. counterpart organizations in the retail sector. Some tentative steps have now even been taken into Mexico and beyond North America. The business office of the company is operating professionally – correspondence and activities are efficient. Photographic evidence is posted on the due diligence site for verification of the above. We have been visited by a delegation of retail shareholders with comments posted to the forum. Moving to the next level of sales is more important than moving to the next level of stock exchange because higher sales volume diminishes the need for capital, as the company will then be self-sustaining. Finally – and this is a very important point that is consistently overlooked by forum discussions – dilution is not a one way street. A company can repurchase its shares on the market. Therefore, if the company becomes self-sustaining, a certain percentage of profit can be directed to soak up the earlier growth of outstanding shares to gradually reduce the float again. We have resisted plans to do this by way of contrived instruments. The most down-to-earth approach is to do so from profits. In such a situation, all the “long” investors will win for one of two reasons; either the entry of Winning Brands into the market to repurchase shares will cause the prices to rise, or the share price remains affordable but the share count decreases causing all remaining shareholders to have an increasing percentage of the company. When other market forces cause the share price to increase again there will be an even more dramatic effect.
We should also recognize that the market makers are sometimes falsely maligned. Winning Brands is followed by a number of professional trading interests. I do not subscribe to the view that they routinely collude to the determinant of the company. They also probably do not co-operate regularly for the benefit of the company. They simply care about making transactional profit in the present. They are independent commercial interests who measure their success on an hourly or daily basis through narrow margin trading. As such, they provide an important service to the retail shareholders. The market makers provide liquidity. This is not often enough appreciated in the case of Winning Brands - our shareholders can almost always trade their shares within a reasonable time. This is because the market makers observe that Winning Brands has an above average quality community of shareholders. The risk to the market maker of picking up shares from a seller is not unreasonably high because Winning Brands continues to generate positive operational momentum that justifies increasing interest by a wide range of retail speculative investors. Therefore, market makers do not only fill transactions, they buy for own account.
Bottom line – I view the long term repurchase of shares by Winning Brands Corporation in the open market as a much better use of profit than dividends or expenditure on a listing in an stock exchange that is more senior, and more expensive, where all aspects of the firm’s momentum will be slowed. Exciting and substantial capital gains in the senior exchanges are far fewer and harder to come by. Thus, we have to be careful what we wish for. Furthermore, it is our long term goal to provide voluntary disclosure in the form of an Issuer Information Statement. This will address the largest objective of being listed on a stock exchange.
We all have much to be grateful for in this informal arrangement by all parties. My job is to ensure that the market remains free of any company manipulation by avoiding false promotion initiatives, continuing to build a real business and earning a reputation of being trustworthy. I make mistakes, but I never knowingly harm the interests of shareholders for whom I ultimately work. I am driven to provide shareholders with a success story for their portfolio – namely, getting in on the ground floor of a business that may one day be studied as a role model of “coming from nowhere” and going on to a position of deserved respect amongst its peers, within the investment community and by consumers internationally.
Eric Lehner, CEO
Winning Brands Group